I am often asked what is the difference between mediation and arbitration. That question is usually followed by another: is one better than the other? In this blog, I will examine the differences between mediation and arbitration and outline some of the advantages of each.
Mediation is a form of alternative dispute resolution. It allows parties involved in litigation to step outside of the court system and try and settle their disagreement privately. Their efforts to reach a settlement are helped by a neutral third party, known as the mediator. Usually, mediators are retired judges or senior lawyers.
Once the parties decide to mediate, they must agree on a mediator, the time and place of the mediation, and what issues will be discussed at the mediation. Because mediation occurs outside of the court system, the issues to be discussed may be broader or narrower than those raised in the litigation.
The role of a mediator is very different from that of a judge. The mediator does not make orders or impose a settlement on the parties. Instead, the mediator helps the parties to craft their own solution to the dispute. How the mediator helps facilitate a resolution differs depending on the individual style of the mediator, the type of dispute, and the personality of the parties. However, mediators often offer a frank evaluation of the strengths and weaknesses of each party’s legal positions, they act as a sounding board for different settlement ideas and grievances, and they act as a go-between for messages between the parties while trying to build consensus.
Mediation does not result in a “winner” and “loser” in the same way that litigation does. In order to increase the chances that the mediation will result in a settlement, the parties must be prepared to compromise, negotiate in good faith, and be willing to settle. Usually, the resolution reached at mediation involves a concession from both sides.
The advantages of mediation include:
Cost Effective: it is often much less expensive to go to mediation than to proceed to court.
Consensual Resolution: the parties can create a solution to their dispute which addresses their unique needs and interests, something a judge sometimes cannot or will not do.
Participation: the parties at mediation are able to voice their opinions, concerns, and ideas in a way that cannot happen in litigation.
Privacy: the terms of a mediated settlement are generally not available to the public. In addition, the parties may agree to keep the terms of the mediated settlement confidential.
Speed: mediation can be scheduled at any time and a settlement may be reached after only a day.
Arbitration is also a form of alternative dispute resolution: it allows parties involved in litigation to bypass the court system and adjudicate their dispute privately. More often than not, arbitrators are retired judges, but senior lawyers can also act as arbitrators (in my own practice, I have acted as both a mediator and an arbitrator).
As with mediation, it is up to the parties to choose the arbitrator(s), to set out what issues are to be arbitrated, and the procedural steps and protocols to be followed at the arbitration. The agreement is usually memorialized in an arbitration agreement. In Ontario, arbitrations are governed by the Arbitration Act, 1991, which sets out both default and mandatory provisions for the conduct of arbitrations.
This is where the similarities between a mediation and arbitration end. Unlike in mediation, an arbitrator’s role is similar to that of a judge and the experience of being in an arbitration often mirrors being in court. Each party has the opportunity to present their case to the arbitrator. The arbitrator hears the evidence and may ask to see additional documents or even ask questions of the witnesses. The parties often empower the arbitrator to make interim decisions during the course of the arbitration (usually on procedural questions). However, similar to mediation, the arbitrator must be independent of the parties, impartial about the outcome, and must treat the parties equally and fairly.
After hearing the evidence and the oral submissions by the lawyers, an arbitrator will render a decision. This is the main difference between mediation and arbitration – while the success of a mediation depends on the parties reaching an agreement between themselves, in an arbitration, the arbitrator has the power to make a decision and declare one of the parties the “winner.”
In addition to deciding the issues in dispute, an arbitrator can order one or more of the parties to pay the legal fees of the other party (or parties), as well as the fees and expenses of the arbitration generally. The decision of the arbitrator is binding on the parties and legally enforceable.
At the outset of the arbitration, the parties will decide whether they will have the right to appeal the decision of the arbitrator to the Superior Court of Justice. However, many parties agree in advance that the decision of the arbitrator will be binding with no right of appeal (after all, why have a private arbitration if you just end up in court?).
The advantages of arbitration include:
Cost Effective: While arbitration is not necessarily low-cost, they are often more cost effective than heading to court.
Privacy: Arbitrations are private and outside the glare of public curiosity and scrutiny. Parties often agree to keep the arbitration award confidential so that the dispute never becomes public.
Timely: The court system can be plagued by delays. Moreover, interim battles can be lengthy, costly, and pull focus from the main fight. Arbitration offers litigants a “light at the end of the tunnel” – a clear deadline when their matter will be heard and decided.
Tailor-made: Arbitration can be tailored to fit the type of dispute and the specific needs of the parties. Formal rules of evidence can be relaxed. The parties can set the schedule and deadlines themselves and are not beholden to the available resources of the court.
Choosing your Arbitrator: While Ontario judges are second to none, there is much to be said for choosing your own arbitrator, someone who the parties are confident has the expertise and skillset to adjudicate their dispute.
At the end of the day, mediation and arbitration each have their role to play (this is especially true in today’s COVID-19 world).
Moreover, the parties do not have to choose just one – they may opt to hold a combined mediation/arbitration: if the parties are unable to reach a resolution between themselves, after an agreed amount of time, the mediator will become an arbitrator and render a decision. Alternately, the parties try mediation first before moving onto arbitration (likely with someone new acting as arbitrator).
It is now plain that our court system won’t return to normal for some time. Moreover, the courts will be busier than ever clearing the backlog of cases when they do re-open at full capacity. This has amplified the push towards alternative dispute resolution. If there was ever a time to think outside the box, that time is now.
I will leave you with a quote from Abraham Lincoln as food for thought:
“Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser – in fees, expenses and waste of time. As a peacemaker, the lawyer has a superior opportunity of being a good man. There will still be business enough.”